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Your paycheck might not stretch as far as it once did.
Neither situation is fun.
But which is worse?
Unemployment rates increase and available jobs decline.
When a recession hits, people tend to pull back their spending on luxuries.
If you work in entertainment, travel or high-end retail, a recession means fewer customers and lower income.
Essential services, on the other hand, are always in demand.
If your job is recession-proof, inflation will be worse for you, Lieberman said.
In some fields, such asplumbing or healthcare, people cant cut back when those needs arise.
So you wont feel the effects of a recession as much as you would inflation.
Investment Losses
The markets also suffer during recessions.
Stock prices tend to decline before a recession and stay low until there are signs of economic recovery.
The value of any investments you have can drop significantly.
Interest rates go lower to help the economy recover.
Borrowing Becomes Tougher
Recessions often lead to higher interest rates on loans.
It is always harder to borrow during a recession, Kaplan said.
How Inflation Is Different
Inflation has a more complex impact on your finances.
But it always imposes additional long-run costs which must be paid to bringresulting inflationary expectationsback down.
To make a run at control inflation, central banks often raise interest rates.
This can slow down economic growth and lead to higher unemployment, similar to the effects of a recession.
Politics and Inflation
Inflation also tends to be accompanied by a politically divisive atmosphere.
In recent years, political division has intensified due to so-called culture wars.
Inflation tends to be accompanied by a politically divisive atmosphere, Kyle said.
Both left-wing and right-wing populist policiescan contribute to inflation.
These policies might provide immediate financial benefits but ultimately lead to higher inflation and long-term economic costs.
The result was hyperinflation, a collapse of the Venezuelan economy, and a collapse of political institutions.
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